I enjoy using this strategy in relatively low-priced stocks with high option volatility. I would use this strategy in either an IRA or margin account where I want to acquire stock at a lower price. It has everything I like in a trade: high probability of success, hefty option open interest, tight and deep penny-wide markets, positive Theta, and it even has directional (upward) bias with room for directional (downward) error and can still be profitable, all in 40+ days.

GM- yes, GM, the old boring Dow stock, has an Oct option volatility over 100% and it's near its 50-year low of $8.81, presently trading at $10.08. If you like GM and the parameters previously outlined above, you might want to consider buying the Oct 10/12 call spread at $0.70 and then financing that call spread buy with a sell of the Oct 9 put for $0.85. The whole package for putting on this trade would be a $0.15 credit.

Presently, the package has approximately 55 long Deltas with 1.11 positive Theta decay.
Let's first look at what can go wrong. I want to know the bad news first! Before commissions, your BREAK EVEN is $8.85, which is $1.23 lower than the present stock price, or over a 10% downward move in the stock! A long Delta position that doesn't lose money when you're wrong by 10%- I can live with that! If you're wrong and the stock goes down 20%, you lose only 8.3%, or $83.00. I can live with that too!

Ok, ok...let's look at the positives! Before commissions, if the stock doesn't move and closes at $10.00 at October expiration, you make $15.00. If the stock goes up 10%, you make $120.00 or 12%, I love that! If the stock goes up 20% and you make $215.00, or over 21%, I love that too! Make more, lose less, I love that even more!

thinkorswim, Inc. and its employee, Tony Battista, do not solicit or recommend any form of trading in the individual stocks (or their derivatives) mentioned above. Please do careful, independent research before investing any money as well as weigh the possible consequences on your particular financial situation before doing so. The risk of loss may be substantial.